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IN THE HIGH COURT OF ALLAHABAD
Shekhar B. Saraf, J.
M/s Eco Plus Steels Pvt. Ltd. – Petitioner
Versus
State of U.P. And Others – Respondents
Writ Tax No. – 916, 1600 of 2022
Decided On : 03-04-2024
Goods and Services Tax - Confiscation and Penalty - Section 130, Section 122, Section 74 - The court discussed the provisions of Section 130 for confiscation of goods and levy of penalty, emphasizing the conditions under which penalty can be imposed. The court also highlighted the requirement for physical verification of goods and the burden of proof on the Department for imposition of penalty and confiscation. The court quashed and set aside the impugned orders in both writ petitions.
Fact of the Case:
The writ petitions challenged orders passed under Section 107 of the Uttar Pradesh Goods and Services Tax Act, 2017, related to confiscation under Section 130 and penalty under Section 122 in one case, and liability arising out of additional stock under Section 74 in the other case.
Finding of the Court:
The court found that the confiscation and penalty were based on estimates without proper physical verification, and the initiation of proceedings under Section 74 was without any legal basis. The court criticized the delay in issuing show cause notice and the lackadaisical approach of the authorities, ultimately quashing and setting aside the impugned orders in both writ petitions.
Issues: The issues involved whether the mere presence of additional stock would result in confiscation and subsequent penalty, and whether the initiation of proceedings under Section 74 was justified.
Ratio Decidendi: The court emphasized the requirement for proper physical verification of goods and the burden of proof on the Department for imposition of penalty and confiscation. It also criticized the delay in issuing show cause notice and the lackadaisical approach of the authorities, ultimately leading to the quashing of the impugned orders in both writ petitions.
Final Decision: Both the writ petitions were allowed, and the impugned orders were quashed and set aside. The court directed the return of any deposited amount to the petitioner within eight weeks.
JUDGMENT :
1. Heard Mr. Aloke Kumar, counsel appearing on behalf of the petitioner and Mr. Rishi Kumar, Additional Chief Standing Counsel appearing for the respondents.
2. The above two writ petitions have been filed challenging the orders passed in appeal under Section 107 of the Uttar Pradesh Goods and Services Tax Act, 2017 (hereinafter referred to as ‘the Act’).
3. In the first writ petition bearing Writ Tax No.916 of 2022, the orders under challenge are the order passed by the respondent No.3 (being the Assessing Officer) dated September 25, 2019 and the order dated April 5, 2022 passed by the Appellate Authority under Section 107 of the Act. The above two orders have been passed in relation to confiscation under Section 130 of the Act and levy of penalty under Section 122 of the Act.
4. In the second writ petition bearing Writ Tax No.1600 of 2022, the order dated December 3, 2022 passed by the respondent No.3 (being the Assessing Officer) and the order dated August 3, 2022 passed by the First Appellate Authority under Section 107 of the Act are under challenge. These orders have been passed under Section 74 of the Act for liability arising out of additional stock that was present with the petitioner.
5. In relation to Writ Tax No.916 of 2022, the issue to be answered is whether mere presence of additional stock would result in confiscation and subsequent penalty.
6. Counsel on behalf of the petitioner has relied on two judgments of the coordinate Bench of this Court in the case of M/s Maa Mahamaya Alloys Pvt. Ltd. vs. State of U.P. and others reported in 2023 82 NTN DX 393 and in the case of M/s Metenere Ltd. vs. Union of India (Writ Tax No.360 of 2020, decided on December 17, 2020) in support of his arguments.
7. From a perusal of the judgment in the case of M/s Maa Mahamaya Alloy Pvt. Ltd. (supra), it is clear that the issue was decided against the respondents. One may rely upon the paragraphs provided below for the same:-
"Section 130. Confiscation of goods or conveyances and levy of penalty-
(1) Notwithstanding anything contained in this Act, if any person -
(i) supplies or receives any goods in contravention of any of the provisions of this Act or the rules made thereunder with intent to evade payment of tax; or
(ii) does not account for any goods on which he is liable to pay tax under this Act; or
(iii) supplies any goods liable to tax under this Act without having applied for registration; or
(iv) contravenes any of the provisions of this Act or the rules made thereunder with intent to evade payment of tax; or
(v) uses any conveyance as a means of transport for carriage of goods in contravention of the provisions of this Act or the rules made thereunder unless the owner of the conveyance proves that it was so used without the knowledge or connivance of the owner himself, his agent, if any, and the person in charge of the conveyance,
then, all such goods or conveyances shall be liable to confiscation and the person shall be liable to penalty under section 122."
15. On a plain reading of the allegations levelled against the petitioner with regard to the improper accounting of goods, the only stipulation contained in Clauses (ii) and (iv) of sub-section (1) of Section 130 can at best be invoked by the department, however, in the present case, even assuming for the sake of argument, that the goods were lying in excess of the goods in record, the case against the petitioner would not fall under Clause (ii) of sub-section (1) of Section 130 for the simple reason that the liability to pay the tax arises at the time of point of supply, and not at any point earlier than that. On a plain reading, the scope of Clause (ii) of subsection (1) of Section 130 is that any assessee who is liable to pay tax and does not account for
The burden of proof for imposition of penalty and confiscation of goods is on the Department, and the same cannot be done on estimates when physical verification could have been carried out.
Proceedings under Section 130 of the UPGST Act cannot be initiated for excess stock; Sections 73 and 74 must be followed for tax determination.
The appellate authority under Section 107(11) of the CGST/SGST Act has the jurisdiction to interfere with the discretion exercised by the adjudicating authority in imposing the fine in lieu of confis....
Definition of the term market value clearly indicates that the term is not referable to the maximum retail price and on the contrary, it is a sale price that is agreed to between a bonafide supplier ....
Intention to evade tax is a prerequisite for imposing penalties under GST Act; mere technical issues should not warrant such penalties.
Penalties for under valuation of goods under the Uttar Pradesh Goods and Service Tax Act cannot be imposed without proper notice as per Sections 73 or 74.
The court established that confiscation under Section 130 requires prior action under Section 129, and adherence to natural justice is essential in such proceedings.
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